2016 (7) TMI 1086 - HC - Income Tax

Undisclosed sale - rejecting the books of accounts - Held that - The rejection of the books on the basis of the admission of the assessee himself was an order which was wholly backed by evidence and by no stretch of imagination the order rejecting the books of account can be said to be perverse. The contention that the books of account were prepared, though belatedly, on the basis of the documents seized, has failed to impress us because the expenditure shown in the books of account was not backed by evidence. Mr. Khaitan is unable to show us that the expenditure, which, according to the assessee was incurred, was proved by any piece of evidence, to have been actually incurred by the assessee. Unless there is adequate evidence as regards expenditure, the amount of income earned by the assessee can never be assessed by any amount of certainty. In the facts and circumstances, it cannot be said that the revenue acted arbitrarily or the order passed by them is perverse. On the top of it, what we find is that the assessment which was made by the Assessing Officer was subsequently reduced by the CIT(A) and the same has been confirmed by the learned Tribunal. These are pure questions of fact. The ground of challenge is perversity. We have already indicated that the order passed by the Assessing Officer or the CIT(A) or the learned Tribunal and each of them is backed by evidence and the ground of perversity is altogether unmeritorious. - Decided in favour of the revenue.

Summary

Issues:
Challenge to judgment and order of Income Tax Appellate Tribunal regarding additions to income for undisclosed sales, land investment, building investment, and peak credit in bank account.

Analysis:
The appeal challenged a judgment and order passed by the Income Tax Appellate Tribunal regarding additions made to the assessee's income. The substantial questions of law raised in the appeal included the correctness of additions such as gross profit from undisclosed sales, investment in land and building, and peak credit in a bank account. The senior advocate for the assessee argued that the assessment was based on seized documents, and the books of account prepared by the assessee were rejected, leading to discrepancies in assessing income and expenditure. The rejection of books was supported by the assessee's admission that the entries were made post-search without proper vouchers. The court found that the expenditure shown in the books was not substantiated by evidence, and without adequate proof of expenditure, the assessment of income cannot be certain.

The court noted that the assessment made by the Assessing Officer was later reduced by the CIT(A) and confirmed by the Tribunal, indicating a proper review process. The grounds of challenge alleging arbitrariness or perversity in the assessment were deemed unmeritorious as each decision was supported by evidence. The court concluded that the revenue did not act arbitrarily, and the orders passed were not perverse. The challenge based on perversity was dismissed as the orders were backed by evidence, and the appeal was consequently rejected. The substantial questions of law were answered in the negative and in favor of the revenue, leading to the dismissal of the appeal.